**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM** **10-Q**


**þ**
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**





**For
      the quarterly period ended March 31, 2008**




or


**o**
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**




**For
      the transition period from** **to**




**Commission
      file number: 001-02292**





**NYFIX,
      INC.**


**(Exact
      name of registrant as specified in its charter)**





**Delaware**
              **(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            **06-1344888**
              **(I.R.S.
                Employer**
              **Identification
                Number)****100
                Wall Street**
              **New
                York, New York**
              **(Address
                of principal executive offices)**
            **10005**
              **(Zip
                code)**


**(646)
      525-3000**


**(Registrant’s
      telephone number, including area code)**









Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.  Yes  **x** No  o









Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated Filer ̈
            Accelerated
                filerý
            Non-accelerated
                filer ̈
            Smaller reportingcompany ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o No x




There
      were 37,460,286 shares of our common stock outstanding on May 6,
      2008.












**TABLE
      OF CONTENTS**





**Page****PART
                  I - FINANCIAL INFORMATION****Item
                  1.**
              **Unaudited
                  Financial Statements**Condensed
                  Consolidated Balance Sheets as of March 31, 2008 and December 31,
                  2007
              4Condensed
                  Consolidated Statements of Operations for the Three Months Ended
                  March 31,
                  2008 and 2007
              5Condensed
                  Consolidated Statement of Changes in Stockholders’ Equity and
                  Comprehensive Income (Loss) for the Three Months Ended March 31,
                  2008
              6Condensed
                  Consolidated Statements of Cash Flows for the Three Months Ended
                  March 31,
                  2008 and 2007
              7Notes
                  to Condensed Consolidated Financial Statements
              8**Item
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
              19**Item
                  3.**
              **Quantitative
                  and Qualitative Disclosures About Market Risk**
              31**Item
                  4.**
              **Controls
                  and Procedures**
              31**PART
                  II - OTHER INFORMATION****Item
                  1.**
              **Legal
                  Proceedings**
              32**Item
                  1A.**
              **Risk
                  Factors**
              32**Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              32**Item
                  3.**
              **Defaults
                  Upon Senior Securities**
              32**Item
                  4.**
              **Submission
                  of Matters to a Vote of Security Holders**
              32**Item
                  5.**
              **Other
                  Information**
              32**Item
                  6.**
              **Exhibits**
              33**Signatures**
              34
  Page
            2




**PRELIMINARY
      NOTES**




When
      we
      use the terms “NYFIX”, the “Company”, “we”, “us” and “our”, we mean NYFIX, Inc.
      and its consolidated subsidiaries.




**Forward
      Looking Statements**




This
      quarterly report on Form 10-Q contains statements that constitute
“forward-looking statements” within the meaning of the safe harbor provisions of
      The Private Securities Litigation Reform Act of 1995. In some cases, you can
      identify these statements by forward-looking words such as “may,” “might,”
“will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “potential” or “continue,” and the negative of these terms and other
      comparable terminology. These forward-looking statements, which are subject
      to
      known and unknown risks, uncertainties and assumptions about us, may include
      projections of our future financial performance based on our growth strategies
      and anticipated trends in our business. These statements are only predictions
      based on our current expectations and projections about future events. There
      are
      important factors that could cause our actual results, level of activity,
      performance or achievements to differ materially from the results, level of
      activity, performance or achievements expressed or implied by the
      forward-looking statements. In particular, you should consider the numerous
      risks and uncertainties described under Part I Item 1A. - Risk Factors in
      our Form 10-K filed for the fiscal year ended December 31, 2007.




These
      risks and uncertainties are not exhaustive. Other sections of this report
      describe additional factors that could adversely impact our business and
      financial performance. Moreover, we operate in a very competitive and rapidly
      changing environment. New risks and uncertainties emerge from time to time,
      and
      it is not possible to predict all risks and uncertainties, nor can we assess
      the
      impact of all factors on our business or the extent to which any factor, or
      combination of factors, may cause actual results to differ materially from
      those
      contained in any forward-looking statements.




Although
      we believe the expectations reflected in the forward-looking statements are
      reasonable, we cannot guarantee future results, level of activity, performance
      or achievements. Moreover, neither we nor any other person assumes
      responsibility for the accuracy or completeness of any of these forward-looking
      statements. You should not rely upon forward-looking statements as guarantees
      of
      future events. We disclaim any duty to update any of these forward-looking
      statements after the filing of this report to conform our prior statements
      to
      actual results or revised expectations and we do not intend to do so, and these
      forward-looking statements should not be relied upon as representing our views
      as of any date subsequent to the filing of this report.




Forward-looking
      statements include, but are not limited to, statements about:





·
            the
                impact of recording a significant impairment charge relating to goodwill
                due to the fact that we have not been
                profitable;


·
            the
                effects of current, pending and future legislation;


·
            the
                impact of regulation and regulatory actions;


·
            our
                ability to achieve and maintain effective internal control over financial
                reporting in accordance with Securities and Exchange Commission (“SEC”)
                rules promulgated under Section 404 of the Sarbanes-Oxley Act of
                2002 (the
                “Sarbanes-Oxley Act”);


·
            the
                impact of accounting for stock-based compensation and ongoing regulatory
                investigations, including the possibility of new and significant
                information subsequently arising which could lead to different
                determinations and require different accounting treatment;


·
            actions
                and initiatives by both current and future competitors;


·
            our
                ability to accommodate increased levels of trading activity and keep
                current with market data
                requirements;


·
            our
                business’ possible or assumed future results of operations and cash
                flows;


·
            our
                business’ competitive position;


·
            potential
                growth opportunities available to our
                business;


·
            the
                likelihood of success and impact of
                litigation;


·
            our
                expectation with respect to securities markets and general economic
                conditions; and


·
            our
                ability to keep up with rapid technological
                change.




We
      expressly qualify in their entirety all forward-looking statements attributable
      to us or any person acting on our behalf by the cautionary statements contained
      or referred to in this section.




Page
          3


**** **PART
      I - FINANCIAL INFORMATION**





**Item
      1. Unaudited Financial Statements**




**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Balance Sheets**


**(in
      thousands, except share and per share amounts)**





**March 31,**
            
            **December 31,****2008**
            
            **2007****(Unaudited)**
            
            **(Audited)****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            57,642
            
            $
            75,657Accounts
                receivable, less allowances of $226 and $282, respectively
            
            
            16,444
            
            
            14,609Clearing
                assets
            
            
            729,266
            
            
            483,867Prepaid
                expenses and other current assets
            
            
            7,693
            
            
            7,900Total
                current assets
            
            
            811,045
            
            
            582,033Property
                and equipment, net of accumulated depreciation and amortization of
                $39,529
                and $37,984, respectively
            
            
            22,284
            
            
            21,478Capitalized
                software costs, net of accumulated amortization of $16,067 and $15,755,
                respectively
            
            
            6,720
            
            
            5,789Goodwill
            
            
            57,322
            
            
            57,401Acquired
                intangible assets, net of accumulated amortization of $11,074 and
                $10,967,
                respectively
            
            
            3,601
            
            
            3,708Other
                assets, net
            
            
            860
            
            
            1,745Total
                assets
            
            $
            901,832
            
            $
            672,154**Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            29,143
            
            $
            39,163Clearing
                liabilities
            
            
            725,382
            
            
            483,600Current
                portion of capital lease obligations
            
            
            725
            
            
            923Current
                portion of other long-term liabilities
            
            
            1,489
            
            
            1,564Deferred
                revenue
            
            
            4,551
            
            
            4,648Total
                current liabilities
            
            
            761,290
            
            
            529,898Long-term
                portion of capital lease obligations
            
            
            431
            
            
            550Long-term
                debt
            
            
            9,949
            
            
            9,941Other
                long-term liabilities
            
            
            1,343
            
            
            2,354Total
                liabilities
            
            
            773,013
            
            
            542,743Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, $1.00 par value; 5,000,000 shares authorized:Series
                A, none issued
            
            
            -
            
            
            -Series
                B Voting Convertible, 1,500,000 shares issued and outstanding; liquidation
                preference of $76,313 at March 31, 2008
            
            
            62,092
            
            
            62,092Series
                C Non-Voting Convertible, none issued
            
            
            -
            
            
            -Common
                stock, $0.001 par value; 100,000,000 shares authorized; 38,373,268
                and
                37,725,758 shares issued, respectively
            
            
            266,262
            
            
            261,307Preferred
                stock dividend distributable, 525,000 common shares
            
            
            -
            
            
            2,441Accumulated
                deficit
            
            
            (186,949
            )
            
            (183,232
            )Treasury
                stock, 923,108 and 906,826 shares, respectively, at cost
            
            
            (12,600
            )
            
            (13,194
            )Accumulated
                other comprehensive income (loss)
            
            
            14
            
            
            (3
            )Total
                stockholders' equity
            
            
            128,819
            
            
            129,411Total
                liabilities and stockholders' equity
            
            $
            901,832
            
            $
            672,154





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




Page
          4





**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Statements of Operations (Unaudited)**


**(in
      thousands, except per share amounts)**





**Three Months Ended**
              **March 31,****2008**
            
            **2007****Revenue:**Subscription
                and maintenance
            
            $
            17,518
            
            $
            17,274Transaction
            
            
            13,268
            
            
            9,776Product
                sales and services
            
            
            621
            
            
            680Total
                revenue
            
            
            31,407
            
            
            27,730**Cost
                of revenue:**Subscription
                and maintenance
            
            
            7,651
            
            
            8,546Transaction
            
            
            6,412
            
            
            5,401Product
                sales and services
            
            
            81
            
            
            387Total
                cost of revenue
            
            
            14,144
            
            
            14,334**Gross
                profit**
            
            
            17,263
            
            
            13,396**Operating
                expense:**Selling,
                general and administrative
            
            
            20,396
            
            
            16,878SEC
                investigation, restatement and other related expenses
            
            
            137
            
            
            3,593Depreciation
                and amortization
            
            
            447
            
            
            282Restructuring
                charge
            
            
            (158
            )
            
            -Loss
                from operations
            
            
            (3,559
            )
            
            (7,357
            )Interest
                expense
            
            
            (211
            )
            
            (136
            )Investment
                income
            
            
            546
            
            
            1,227Other
                expense, net
            
            
            -
            
            
            (15
            )Loss
                before income tax provision
            
            
            (3,224
            )
            
            (6,281
            )Income
                tax provision
            
            
            128
            
            
            47Net
                loss
            
            
            (3,352
            )
            
            (6,328
            )Accumulated
                preferred dividends
            
            
            (1,142
            )
            
            (1,717
            )Loss
                applicable to common stockholders
            
            $
            (4,494
            )
            $
            (8,045
            )Basic
                and diluted loss per common share (net of accumulated preferred
                dividends)
            
            $
            (
                0.12
            )
            $
            (
                0.22
            )Basic
                and diluted weighted average common shares outstanding
            
            
            37,312
            
            
            35,767





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




Page
          5





**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive
      Income (Loss) (Unaudited)**


**For
      the Three Months Ended March 31, 2008**


**(in
      thousands, except share amounts)**





**Series B Voting**
              **Convertible preferred**
            
            **Preferred stock**
            
            
            
            
            
            
            
            **Accumulated**
              **other**
            
            **Total****stock issued**
            
            **dividend**
            
            **Common stock issued**
            
            **Accumulated**
            
            **Treasury**
            
            **comprehensive**
            
            **stockholders'****Shares**
            
            **Amount**
            
            **distributable**
            
            **Shares**
            
            **Amount**
            
            **deficit**
            
            **stock**
            
            **income (loss)**
            
            **equity**Balance
                December 31, 2007
            
            
            1,500,000
            
            $
            62,092
            
            $
            2,441
            
            
            37,725,758
            
            $
            261,307
            
            $
            (183,232
            )
            $
            (13,194
            )
            $
            (3
            )
            $
            129,411Comprehensive
                loss:Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,352
            )
            
            -
            
            
            -
            
            
            (3,352
            )Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            17
            
            
            17Total
                comprehensive loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,335
            )Issuance
                of common stock for restricted stock units settled in
                shares
            
            
            -
            
            
            -
            
            
            -
            
            
            122,510
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Common
                shares issued in payment of preferred stock dividend
            
            
            -
            
            
            -
            
            
            (2,441
            )
            
            525,000
            
            
            2,441
            
            
            -
            
            
            -
            
            
            -
            
            
            -Issuance
                of shares from treasury stock pursuant to employment
                agreement
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (300
            )
            
            (365
            )
            
            665
            
            
            -
            
            
            -Purchase
                of treasury shares (16,282 shares)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (71
            )
            
            -
            
            
            (71
            )Contingent
                conversion price adjustment related to convertible notes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            14
            
            
            -
            
            
            -
            
            
            -
            
            
            14Stock-based
                compensation expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,800
            
            
            -
            
            
            -
            
            
            -
            
            
            2,800Balance
                March 31, 2008
            
            
            1,500,000
            
            $
            62,092
            
            $
            -
            
            
            38,373,268
            
            $
            266,262
            
            $
            (186,949
            )
            $
            (12,600
            )
            $
            14
            
            $
            128,819





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




Page
          6





**NYFIX,
      Inc. and Subsidiaries**


**Condensed
      Consolidated Statements of Cash Flows (Unaudited)**


**(in
      thousands)**





**Three Months Ended**
              **March 31,****2008**
            
            **2007**Operating
                activities:Net
                loss
            
            $
            (3,352
            )
            $
            (6,328
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            2,388
            
            
            2,756Restructuring
                charge
            
            
            (158
            )
            
            -Stock-based
                compensation expense
            
            
            2,800
            
            
            109Amortization
                of debt discounts and premiums
            
            
            21
            
            
            10Deferred
                income taxes
            
            
            49
            
            
            37Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (1,837
            )
            
            (3,793
            )Prepaid
                expenses and other assets
            
            
            1,069
            
            
            (677
            )Clearing
                assets
            
            
            (245,312
            )
            
            (8,449
            )Deferred
                revenue
            
            
            (100
            )
            
            207Accounts
                payable, accrued expenses and other liabilities
            
            
            (6,273
            )
            
            1,971Clearing
                liabilities
            
            
            241,704
            
            
            6,713Net
                cash used in operating activities
            
            
            (9,001
            )
            
            (7,444
            )Investing
                activities:Capital
                expenditures for property and equipment
            
            
            (2,544
            )
            
            (2,653
            )Capitalization
                of software costs
            
            
            (1,453
            )
            
            (821
            )Tax
                benefit attributable to goodwill
            
            
            79
            
            
            10Payment
                for acquisition of minority interests
            
            
            (4,656
            )
            
            -Net
                cash used in investing activities
            
            
            (8,574
            )
            
            (3,464
            )Financing
                activities:Principal
                payments under capital lease obligations
            
            
            (317
            )
            
            (251
            )Purchases
                of treasury shares
            
            
            (71
            )
            
            -Other,
                net
            
            
            (65
            )
            
            (92
            )Net
                cash used in financing activities
            
            
            (453
            )
            
            (343
            )Effect
                of exchange rate changes on cash
            
            
            13
            
            
            (3
            )Net
                decrease in cash and cash equivalents
            
            
            (18,015
            )
            
            (11,254
            )Cash
                and cash equivalents, beginning of period
            
            
            75,657
            
            
            105,888Cash
                and cash equivalents, end of period
            
            $
            57,642
            
            $
            94,634





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




Page
          7


**Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)**


**1.**  **Summary
      of Significant Accounting Policies**




*Nature
      of Operations*




NYFIX,
      Inc., together
      with its consolidated subsidiaries, provides trading workstations, middle office
      trade automation technologies and trade messaging services to domestic and
      international market participants. In addition, NYFIX’s registered broker-dealer
      subsidiaries also provide automated trade execution services to institutional
      counterparties and operate a matched-book stock borrow/stock loan business.




The
      Company has its headquarters and principal office on Wall Street in New York
      City, and has other offices in London, Hong Kong, Boston, MA, Stamford, CT,
      Lyndhurst, NJ and San Francisco, CA. The Company operates redundant data centers
      in the northeastern United States, as well as data center hubs in London and
      Amsterdam.




*Basis
      of Presentation of Interim Financial Statements*




The
      accompanying unaudited condensed consolidated financial statements were prepared
      by the Company pursuant to the rules and regulations of the Securities and
      Exchange Commission (the “SEC”) and, in the opinion of management, include all
      adjustments (consisting of normal recurring accruals and adjustments necessary
      for adoption of new accounting standards) necessary to present fairly the
      results of the interim periods shown. Certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with U.S. generally accepted accounting principles (“GAAP”) have been condensed
      or omitted pursuant to such SEC rules and regulations. Management believes
      that
      the disclosures made are adequate to make the information presented not
      misleading. The results for the interim periods are not necessarily indicative
      of results for the full year. The financial statements contained herein should
      be read in conjunction with the consolidated financial statements and notes
      thereto included in the Company’s Annual Report on Form 10-K for the fiscal year
      ended December 31, 2007 (“2007 Form 10-K”).




The
      accompanying unaudited condensed consolidated financial statements include
      the
      accounts of NYFIX, Inc. and its majority-owned and wholly-owned subsidiaries.
      All significant intercompany balances and transactions have been eliminated
      in
      consolidation.




*Significant
      Accounting Policies*




There
      have been no material changes in the Company’s significant accounting policies
      during 2008, as compared to what was previously disclosed in the 2007 Form
      10-K.




**2.
      Equity Incentive Plans**




The
      Company has stock-based incentive plans under which time-based and
      performance-based stock options and restricted stock units (“RSUs”) have been
      granted to employees and non-employee members of the Board of Directors.
      Generally, these options and RSUs vest over a period of four years and are
      forfeited, except in certain circumstances, in the event the employee or
      director terminates his or her employment or relationship with the Company.
      Stock options expire in ten years.




The
      fair
      value of options is estimated using the Black-Scholes option-pricing model
      which
      considers, among other factors, the expected life of the award and the expected
      volatility of the Company’s stock price. Although the Black-Scholes model meets
      the requirements of Statement of Financial Accounting Standards (“SFAS”) 123
      (revised 2004), *Share-Based
      Payment* and
      Staff Accounting Bulletin No. 107, *Share-Based
      Payment* ,
      the
      fair values generated by the model may not be indicative of the actual fair
      values of the Company’s awards, as it does not consider other factors important
      to those stock-based compensation awards, such as continued employment, periodic
      vesting requirements, and limited transferability.


Page
            8
 **Notes
          to Condensed Consolidated Financial Statements – continued
          (Unaudited)**


*Time-based
      Stock Option Awards*




A
      summary
      of activity under time-based stock option plans for the three months ended
      March
      31, 2008, follows:


**Options**
              
              **Shares**
              
              **Weighted**
                **average**
                **exercise**
                **price**
              
              **Weighted**
                **average**
                **remaining**
                **contractual**
                **term (years)**
              
              **Aggregate**
                **intrinsic**
                **value**
                **(000's)**Outstanding
                  at beginning of the year
              
              
              8,739,684
              
              $
              5.98Granted
              
              
              801,000
              
              $
              3.88Exercised
              
              
              -
              
              
              -Cancelled
              
              
              (189,898
              )
              $
              5.53Outstanding
                  at end of the period
              
              
              9,350,786
              (1)
              $
              5.81
              
              
              8.5
              
              $
              681Exercisable
                  at end of the period
              
              
              3,622,910
              (1)
              $
              7.91
              
              
              6.8
              
              $
              291




(1)
      Includes 127,334 shares related to pending exercises not yet settled. The
      weighted average exercise price for such shares approximates $3.55 per
      share.




*Time-Based
      RSUs*






A
      summary
      of activity under time-based restricted stock units for the three months ended
      March 31, 2008, follows:


**Restricted Stock Units**
              
              **Shares**
              
              **Weighted**
                **average grant**
                **date fair value**
              
              **Aggregate**
                **intrinsic value**
                **($000's)**
                **(1)**Outstanding
                  at beginning of the year
              
              
              768,250
              
              $
              4.60Granted
              
              
              164,500
              
              $
              3.76Settled
                  with shares
              
              
              (122,510
              )
              $
              4.60
              
              $
              479Cancelled
              
              
              (40,375
              )
              $
              4.60Outstanding
                  at end of the period
              
              
              769,865
              
              $
              4.42





(1)
      Represents the value of NYFIX stock on the date that the restricted stock units
      vest.


On
      grant
      date the fair value for these vested awards was $563.




Page
          9


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**




*Performance-based
      Awards*




A
      summary
      of activity under performance-based stock option plans for the three months
      ended March 31, 2008, follows:


**Options**
              
              **Shares**
              
              **Weighted**
                **average**
                **exercise**
                **price**
              
              **Weighted**
                **average**
                **remaining**
                **contractual**
                **term****(years)**
              
              **Aggregate**
                **intrinsic**
                **value**
                **(000's)**Outstanding
                  at beginning of the year
              
              
              1,428,855
              
              $
              4.60Granted
              
              
              300,000
              
              $
              3.85Exercised
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -Outstanding
                  at end of the period
              
              
              1,728,855
              
              $
              4.47
              
              
              9.6
              
              $
              150Exercisable
                  at end of the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -




In
      addition, during 2007, 350,000 performance-based RSUs were granted.
      Performance-based stock options and performance-based RSUs are eligible to
      be
      earned (in amounts ranging from 0% to 100% of the award) in equal pro rata
      installments over four one-year performance periods based on the achievement
      of
      annual revenue and operating earnings before interest, taxes, depreciation
      and
      amortization goals. Any portion not earned in years one through three is
      eligible to be earned in year four based on the achievement of goals in year
      four. The 2007 goals were not met and none of the eligible awards were earned
      in
      2007.




During
      2008, no additional performance-based RSUs have been granted.




*Stock-based
      Compensation Expense*




Stock-based
      compensation expense during the three months ended March 31, 2008 and 2007
      was
      approximately $2.8 million and $0.1 million, respectively.




As
      of
      March 31, 2008, there was $16.4 million of unrecognized compensation costs
      related to outstanding awards. The Company expects to recognize these costs
      over
      a weighted average period of 1.6 years.




Page
          10


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**




**3.
      Loss Per Share Applicable to Common Stockholders**




The
      following table sets forth the computations of loss per share applicable to
      common stockholders for the three months ended March 31, 2008 and 2007:




**Three Months Ended**
              **March 31,**(in
                thousands, except per share amounts)
            
            **2008**
            
            **2007**Net
                loss
            
            $
            (3,352
            )
            $
            (6,328
            )Less:
                Accumulated preferred dividends
            
            
            (1,142
            )
            
            (1,717
            )Loss
                applicable to common stockholders, basic and diluted
            
            $
            (4,494
            )
            $
            (8,045
            )Basic
                and diluted loss per common share
            
            $
            (0.12
            )
            $
            (0.22
            )Weighted
                average common shares outstanding (1):Basic
                and diluted shares
            
            
            37,312
            
            
            35,767Potentially
                dilutive securities (2):Outstanding
                time-based stock options (3)
            
            
            9,351
            
            
            2,868Outstanding
                time-based restricted stock units (3)
            
            
            770
            
            
            -Warrants
                (3)
            
            
            2,250
            
            
            2,250Convertible
                note(s) (3)
            
            
            1,773
            
            
            1,325Convertible
                preferred stock (3)
            
            
            15,000
            
            
            15,000





(1)
      Excludes nonvested restricted stock and restricted stock units.


(2)
      Excludes performance-based grants as the necessary conditions have not been
      satisfied.


(3)
      The
      impact of time-based stock options, time-based restricted stock units, warrants,
      the convertible notes and the convertible preferred stock on earnings per share
      is antidilutive in a period of loss.




**4.
      Other Balance Sheet Information**




Accounts
      payable and accrued expenses consisted of the following at March 31, 2008 and
      December 31, 2007:




**March 31,**
            
            **December 31,**(in
                thousands)
            
            **2008**
            
            **2007**Accounts
                payable
            
            $
            14,257
            
            $
            16,369Taxes,
                other than income and payroll taxes
            
            
            316
            
            
            439Compensation
                and related
            
            
            5,321
            
            
            12,629Modification
                of stock-based awards
            
            
            370
            
            
            370Deferred
                insurance proceeds (Note 10)
            
            
            5,000
            
            
            -Purchase
                price payable for minority interests
            
            
            2,617
            
            
            7,273Other
            
            
            1,262
            
            
            2,083Total
                accounts payable and accrued expenses
            
            $
            29,143
            
            $
            39,163




Page
          11


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**


**5.
      Broker-Dealer Operations**




*Clearing
      Assets and Liabilities*




Clearing
      assets and liabilities consisted of the following at March 31, 2008 and December
      31, 2007:




**March 31,**
            
            **December 31,**(in
                thousands)
            
            **2008**
            
            **2007**Securities
                borrowed
            
            $
            716,764
            
            $
            480,884Securities
                failed-to-deliver
            
            
            6,057
            
            
            664Deposits
                with clearing organizations and others
            
            
            1,768
            
            
            1,049Receivables
                from clearing organizations and firms
            
            
            4,677
            
            
            1,270Total
                clearing broker assets
            
            $
            729,266
            
            $
            483,867Securities
                loaned
            
            $
            717,556
            
            $
            482,959Securities
                failed-to-receive
            
            
            2,997
            
            
            641Payables
                to clearing organizations and firms
            
            
            4,829
            
            
            -Total
                clearing broker liabilities
            
            $
            725,382
            
            $
            483,600




*Securities
      Lending*




The
      Company receives collateral under securities borrowed transactions, which it
      is
      allowed by contract or custom to sell or repledge. As of March 31, 2008,
      securities borrowed with a fair value of $697.5 million were repledged for
      securities loaned. The gross amounts of interest earned on cash provided to
      counterparties as collateral for securities borrowed and interest incurred
      on
      cash received from counterparties as collateral for securities loaned and the
      resulting net amount included in transaction revenue for the three months ended
      March 31, 2008 and 2007, were as follows:




**Three Months Ended****March 31,**(in
                thousands)
            
            **2008**
            
            **2007**Interest
                earned
            
            $
            2,918
            
            $
            3,652Interest
                incurred
            
            
            (2,653
            )
            
            (3,341
            )Net
            
            $
            265
            
            $
            311




*Regulatory
      Net Capital Requirements*




*U.S.
      registered broker-dealer subsidiaries* - NYFIX
      Securities Corporation (“NYFIX Securities” - previously comprised of NYFIX
      Clearing Corporation and NYFIX Transaction Services, Inc., which were merged
      and
      renamed on September 30, 2007) and NYFIX
      Millennium, L.L.C. (“NYFIX Millennium”) are
      subject to the SEC’s Uniform Net Capital Rule (15c3-1), which requires the
      maintenance of minimum regulatory net capital. NYFIX Securities has elected
      to
      use the alternative method, as permitted by the rule, which requires the
      maintenance of minimum regulatory capital (as defined in the rule) equal to
      the
      greater of $250,000 or 2% of aggregate debit items arising from customer
      transactions (as defined in the rule). NYFIX Securities’ membership in the
      Depository Trust & Clearing Corporation (the “DTCC”) requires it to maintain
      excess regulatory net capital of $10.0 million. NYFIX Millennium has elected
      to
      use the aggregate indebtedness standard method, which requires that the ratio
      of
      aggregate indebtedness to regulatory net capital (both as defined in the rule)
      shall not exceed 15 to 1. The regulatory net capital ratio for NYFIX Millennium
      at March 31, 2008 was 0.92 to 1 .




*U.K.
      registered subsidiaries* - NYFIX
      International, Ltd. (“NYFIX International”) is a registered firm of the
      Financial Services Authority (“FSA”) in the United Kingdom. NYFIX
      International is required to maintain the greater of the base capital resources
      requirement of €730,000 or the variable capital resources requirement, which is
      made up of credit risk, market risk and fixed overhead (equal to three months
      average expenditures) requirements.




At
      March
      31, 2008, the aggregate regulatory net capital/resources of the Company’s
      regulated subsidiaries in the United States and United Kingdom were $35.1
      million, which was $23.4 million in excess of the Company’s aggregate
      requirement of $11.6 million (including the $10 million excess required by
      DTCC).




Page
          12




**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**


**6.
      Restructuring Charges**




During
      October 2007, the Company entered into a strategic agreement with Citi’s Lava
      Trading (“Lava”) to offer NYFIX Fusion OMS clients a transition arrangement to
      the Lava ColorPalette® OMS in connection with the decision to exit the Fusion
      OMS business. As part of this transaction, the Company offered one-time
      termination benefits to affected employees. The Company recorded a restructuring
      charge of $0.3 million in the first quarter of 2008, which consisted of
      severance and retention costs. The Company expects the transition to be
      substantially complete by the end of the second quarter of 2008 and expects
      to
      incur an additional $0.3 million of such costs provided that certain employees
      stay for all or a portion of the remaining transition period, as
      required.




In
      March
      2008, the Company terminated its lease and corresponding sublease of office
      space previously occupied in Stamford, CT for the payment of a $0.5 million
      lease termination fee. As a result, the Company reversed $0.5 million of
      previously recorded restructuring costs in the first quarter of 2008.




The
      liabilities related to the restructuring charges are included in current portion
      of other long-term liabilities and other long-term liabilities. The following
      table summarizes the activity in the liabilities related to the restructuring
      charges for the three months ended March 31, 2008.




(in thousands)
            
            **Lease costs,**
              **net of sublease**
              **income**
            
            **Severance**
            
            **Total****2004
                restructuring costs**Remaining
                liability at December 31, 2007
            
            $
            643
            
            $
            -
            
            $
            643Cash
                payments
            
            
            1
            
            
            -
            
            
            1Non-cash
                charges and other
            
            
            12
            
            
            -
            
            
            12Remaining
                liability at March 31, 2008
            
            
            656
            
            
            -
            
            
            656**2006
                restructuring costs**Remaining
                liability at December 31, 2007
            
            
            998
            
            
            -
            
            
            998Lease
                termination fee
            
            
            (514
            )
            
            -
            
            
            (514
            )Cash
                payments
            
            
            (22
            )
            
            -
            
            
            (22
            )Restructuring
                charge reversal
            
            
            (471
            )
            
            -
            
            
            (471
            )Non-cash
                charges and other
            
            
            9
            
            
            -
            
            
            9Remaining
                liability at March 31, 2008
            
            
            -
            
            
            -
            
            
            -**2007
                restructuring costs**Remaining
                liability at December 31, 2007
            
            
            -
            
            
            293
            
            
            293Restructuring
                charge
            
            
            -
            
            
            314
            
            
            314Cash
                payments
            
            
            -
            
            
            (129
            )
            
            (129
            )Remaining
                liability at March 31, 2008
            
            
            -
            
            
            478
            
            
            478Total
                restructuring liability at March 31, 2008
            
            $
            656
            
            $
            478
            
            
            1,134Less:
                current portion
            
            
            
            (827
            )Long-term
                portion
            
            
            
            
            
            
            
            $
            307




**7.
      Income Taxes**




The
      income tax provision differs from the statutory U.S. federal income tax rate
      due
      primarily to a valuation allowance provided against net deferred tax assets.
      As
      described in the Company’s 2007 Form 10-K, the Company maintains a valuation
      allowance in accordance with SFAS No. 109, *Accounting
      for Income Taxes,* on its
      net deferred tax assets. This allowance excludes the potential off-setting
      impact of the deferred tax liability for amortization of goodwill related to
      the
      acquisition of NYFIX
      Millennium L.L.C. (“NYFIX Millennium”) and previously Renaissance
      Trading Technologies, LLC (“Renaissance”) due to the indefinite life of
      goodwill. Until the Company achieves and sustains an appropriate level of
      profitability, it plans to maintain a valuation allowance on its net deferred
      tax assets.




Page
          13


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**




**8.
      Total Comprehensive Loss**




The
      components of total comprehensive loss were as follows:




**Three Months Ended**
              **March 31,**(in
                thousands)
            
            **2008**
            
            **2007**Net
                loss
            
            $
            (3,352
            )
            $
            (6,328
            )Foreign
                currency translation adjustment
            
            
            17
            
            
            1Total
                comprehensive loss
            
            $
            (3,335
            )
            $
            (6,327
            )




**9.
      Business Segment Information**




In
      accordance with SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information* ("SFAS
      131"), the Company is reporting certain information relating to its operating
      segments. The Company’s segments are organized into three operating divisions
      through which the Company’s chief operating decision makers manage the Company’s
      business. These divisions, as described in more detail below, are organized
      around the products and services provided to customers and represent the
      Company’s reportable segments under SFAS 131.




*FIX
      Division* .
      The FIX
      Division provides messaging channels for institutions that are members of its
      trading community for order routing and other value-added services. The FIX
      Division also provides software and consultative services to enable global
      financial institutions to utilize the industry established Financial Information
      Exchange Protocol for messaging, monitoring and processing transaction
      information.




*Transaction
      Services Division* .
      The
      Transaction Services Division is currently comprised of the two (formerly three)
      U.S. registered broker-dealer subsidiaries, NYFIX Millennium and NYFIX
      Securities, together with the execution business of NYFIX International in
      the
      U.K. NYFIX Millennium, an alternative trading system (“ATS”) registered under
      SEC Regulation ATS, provides anonymous matching and routing of U.S. equity
      securities. NYFIX Securities provides direct electronic market access and
      algorithmic trading products, operates a matched-book stock borrow/stock loan
      business and clears trades on behalf of itself and NYFIX Millennium. NYFIX
      Millennium and NYFIX Securities also resell certain products and services
      offered by the FIX Division and the OMS Division. In the second quarter of
      2007
      the Company’s Board of Directors approved a new initiative, Euro
      Millennium *TM* ,
      a
      multilateral trading facility for non-displayed liquidity in pan-European listed
      cash equities housed within NYFIX International. During the three months ended
      March 31, 2008, the Company incurred pre-operating and start-up costs of $2.2
      million related to this initiative. These pre-operating and start-up costs
      are
      included in Corporate & Other in the segment information reported below.
      Euro Millennium *TM* initiated trading activities during March 2008.




*Order
      Management Systems Division* .
      The OMS
      Division provides software applications for the management of New York Stock
      Exchange (“NYSE”) and Nasdaq listed trading activities. These products enable
      customers to take advantage of the broad range of products and services offered
      by other divisions. The Company does not allocate to the OMS Division any
      introductory revenue for business generated by the FIX Division and the
      Transaction Services Division from OMS Division clients. The OMS Division
      includes revenues and expenses related to the Fusion OMS product which was
      discontinued in October 2007. The 2008 operating loss for the OMS Division
      includes severance related restructuring charges of $0.3 million associated
      with
      discontinuing the Fusion OMS product as well as an additional loss of $0.3
      million associated with running the Fusion OMS business.




The
      Company does not currently break out total assets by reportable segment as
      there
      is a high level of shared utilization between certain reportable
      segments.




Page
          14


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**


The
      following table presents information by reportable segment for the three months
      ended March 31, 2008 and 2007:




(in thousands)
            
            **FIX Division**
            
            **Transaction**
              **Services**
              **Division**
            
            **OMS**
              **Division**
            
            **Corporate**
              **& Other (1)**
            
            **Total****March
                31, 2008**Revenue
                - external customers
            
            $
            15,375
            
            $
            14,370
            
            $
            1,662
            
            $
            -
            
            $
            31,407Revenue
                (cost of revenues), net - intersegment
            
            
            760
            
            
            (977
            )
            
            217
            
            
            -
            
            
            -Net
                revenue
            
            
            16,135
            
            
            13,393
            
            
            1,879
            
            
            -
            
            
            31,407Operating
                income (loss) (2)
            
            
            2,186
            
            
            (1,071
            )
            
            (2,689
            )
            
            (1,985
            )
            
            (3,559
            )**March
                31, 2007**Revenue
                - external customers
            
            $
            13,309
            
            $
            11,014
            
            $
            3,407
            
            $
            -
            
            $
            27,730Revenue
                (cost of revenues), net - intersegment
            
            
            570
            
            
            (808
            )
            
            238
            
            
            -
            
            
            -Net
                revenue
            
            
            13,879
            
            
            10,206
            
            
            3,645
            
            
            -
            
            
            27,730Operating
                income (loss) (2)
            
            
            1,563
            
            
            873
            
            
            (4,228
            )
            
            (5,565
            )
            
            (7,357
            )





(1)
      Corporate & Other includes SEC investigation, restatement and other related
      expenses, corporate restructuring costs/reversals, Euro Millennium costs,
      certain transitional costs and other corporate items which are not allocated
      to
      reportable segments.


(2)
      Operating income (loss) by segment reflects a significant amount of costs which
      are allocated by headcount, usage and other methods, depending on the nature
      of
      the cost.




**10.
      Commitments and Contingencies**




*Stock-based
      Compensation Related Matters*




*SEC
      Investigation*




On
      October 28, 2004, the Company received a request from the SEC relating to its
      historical stock option granting practices and related matters. On February
      15,
      2005, the SEC obtained a formal order of investigation, and in April 2005 issued
      a subpoena to the Company. In March and April 2005, the SEC issued subpoenas
      to
      a current director and to former officers and directors. The SEC has taken
      testimony from one current director, at least three former directors and at
      least one of the Company’s former employees, as well as from third parties,
      including the Company’s former independent registered public accounting firm.
      The SEC has also issued subpoenas to at least two current and former directors
      from whom it has not asked for testimony. The Company produced more than 800,000
      pages of documents to the SEC, and believes that it has completed producing
      responsive documents.




*Grand
      Jury Subpoena*




In
      May
      2006, the Company received a grand jury subpoena from the U.S. Attorney for
      the
      Southern District of New York.  The subpoena sought documents relating to
      the Company’s granting of stock options.  With the agreement of the
      Assistant U.S. Attorney handling the case, the Company has responded to the
      subpoena by producing the documents it produces to the staff of the Division
      of
      Enforcement of the SEC. The U.S. Attorney has also conducted interviews with
      at
      least one current employee and two former employees (one of whom is a former
      officer) and with at least one employee of the Company’s former independent
      registered public accounting firm.




*Shareholder
      Derivative Actions*




On
      or
      about June 1, 2006, the Company was served as a nominal defendant with a
      complaint (the “Ritchie Complaint”) in a shareholder derivative action
      titled Ritchie
      v. Castillo, et al in the
      Superior Court for the State of Connecticut.  The Ritchie Complaint also
      names the Company’s former Chairman and Chief Executive Officer, another former
      Chief Executive Officer and director, the Company’s former Chief Information
      Officer, a former Chief Financial Officer, and six other current and former
      directors as defendants. The Ritchie Complaint asserts a claim for breach of
      fiduciary duty against all the individual defendants and a claim for unjust
      enrichment against four individual defendants based on claimed backdating of
      stock option grants to these individuals between 2000 and 2003.  On June 9,
      2006, the Company was named as a nominal defendant in a shareholder derivative
      action titled McLaughlin
      v. Castillo, et al in the
      same court and with the same substantive allegations as the Ritchie action.
      In
      September 2006, the Court consolidated the Ritchie and McLaughlin actions.
      In
      October 2006, plaintiffs filed a consolidated complaint (the “State Court
      Consolidated Complaint”). The State Court Consolidated Complaint contains nine
      counts (as opposed to the two counts previously alleged in each of two actions),
      including counts for an accounting of all stock options granted to the
      individual defendants, breach of fiduciary duty and unjust enrichment, insider
      trading, rescission and breach of contract. The State Court Consolidated
      Complaint adds seven additional defendants: three former directors (one of
      whom
      is deceased); two former Chief Financial Officers, the Company’s former General
      Counsel and former Secretary and the Company’s former Executive Vice President
      and President of NYFIX Millennium. The nine counts of the State Court
      Consolidated Complaint are based on claimed backdating of stock option grants
      to
      eleven individual defendants between 1997 and 2003.  On
      January 25, 2007, the Company and the Outside Directors moved to dismiss the
      action on the grounds that plaintiffs failed to make a demand on the Company’s
      Board of Directors prior to initiating suit on the Company’s behalf. Plaintiffs
      opposed that motion on February 26, 2007, and the Company and the Outside
      Directors filed a reply on March 12, 2007. The motion was taken off calendar
      by
      plaintiffs’ counsel. The Court has not scheduled a hearing on the motion and the
      date of a ruling cannot be predicted at this time.  On
      February 21, 2007, the Court granted a motion to stay discovery pending
      resolution of the motion the Company filed to dismiss.




Page
          15


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**


On
      August
      30, 2006, the Company was served as a nominal defendant with a complaint (the
      “Cattelona Complaint”) in a shareholder derivative action titled Cattelona
      v. Hansen, et al in the
      United States District Court for the District of Connecticut.   The
      Cattelona Complaint also names the Company’s former Chairman and Chief Executive
      Officer, another former Chief Executive Officer and director, a former Chief
      Information Officer, a former Chief Financial Officer, and six other current
      and/or former directors as defendants. The Cattelona Complaint asserts counts
      against the individual defendants for violation of Section 10(b) of the
      Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated
      thereunder, and Section 14(a) of the Exchange Act and Section 20(a) of the
      Exchange Act, and for breach of fiduciary duty, gross mismanagement and
      corporate waste. In addition, the Cattelona Complaint asserts a count against
      four of the individual defendants for unjust enrichment based on claimed
      backdating of stock option grants to the latter individuals between 1999 and
      2002.




On
      or
      about September 7, 2006, a complaint (the “Brock Complaint”) was filed in a
      shareholder derivative action titled Brock
      v. Hansen, et al in the
      United States District Court for the District of Connecticut. The Brock
      Complaint names the Company as a nominal defendant, as well as the Company’s
      former Chairman and Chief Executive Officer, another former Chief Executive
      Officer and director, the Company’s former Chief Information Officer, a former
      Chief Financial Officer, and six other current and/or former directors as
      defendants. The Brock Complaint asserts a count for an accounting of all stock
      options granted to the individual defendants, and counts against all individual
      defendants for violation of Section 14(a) of the Exchange Act, breach of
      fiduciary duty, abuse of control, gross mismanagement, constructive fraud,
      corporate waste, unjust enrichment, and breach of contract. In addition, the
      Brock Complaint asserts counts against three individual defendants for
      rescission and for breach of contract for stock option grants made between
      1997
      and 2001.




On
      December 5, 2006, the U.S. District Court for the District of Connecticut
      consolidated the Brock and Cattelona actions. In December 2006, the plaintiffs
      filed a consolidated complaint (the “Federal Court Consolidated Complaint”). The
      Federal Court Consolidated Complaint contains twelve counts (as opposed to
      the
      eleven counts previously alleged in the Brock Complaint and the seven counts
      previously alleged in the Cattelona Complaint), including counts against all
      defendants for: violations of Section 10(b) of the Exchange Act and Rule 10b-5
      thereunder; violations of Section 14(a) of the Exchange Act; an accounting
      of
      all stock options granted to the individual defendants; breach of fiduciary
      duty
      and/or aiding and abetting; abuse of control; gross mismanagement; constructive
      fraud; corporate waste; and unjust enrichment. The Federal Court Consolidated
      Complaint also contains counts against six of the individual defendants for
      rescission and for breach of contract. The Federal Court Consolidated Complaint
      adds four additional defendants: two former directors, a former Chief Financial
      Officer and a former Executive Vice President of the Company and President
      of
      NYFIX Millennium. The twelve counts of the Federal Court Consolidated Complaint
      are based on claimed backdating of stock option grants to six individual
      defendants from 1997 to the filing of the Federal Court Consolidated Complaint.
      In June 2007, plaintiffs filed a corrected amended consolidated complaint (the
      “Federal Court Amended Consolidated Complaint”). The Federal Court Amended
      Consolidated Complaint drops eight individual defendants (two current directors,
      two former directors, a former Chief Executive Officer and director, a former
      Chief Financial Officer, a former Chief Information Officer and a former
      Executive Vice President of the Company and President of NYFIX Millennium),
      two
      counts for rescission and breach of contract and the count for violation of
      Section 14(a) of the Exchange Act and adds a count under Section 20 of the
      Exchange Act. The ten counts of the Federal Court Amended Consolidated Complaint
      are based on claimed backdating of stock option grants and an allegedly false
      and misleading Form 10-K filed in June 2005.  On
      October 15, 2007, the Company moved to dismiss the amended complaint for
      failure to properly allege demand futility. Plaintiffs filed a response on
      November 12, 2007, and the Company filed a reply on November 26, 2007. On
      December 6, 2007, the Court ruled that plaintiffs’ demand futility allegations
      should be measured as against the Board of Directors in office on June 26,
      2007,
      and requested further briefing in light of that ruling. The Company filed a
      further memorandum on December 17, 2007. Plaintiffs filed a response on January
      7, 2008, and the Company filed a reply on January 25, 2008. The date of the
      Court’s ruling on the defendants’ motion to dismiss cannot be predicted at this
      time.




In
      addition, certain shareholders have made formal inquiries regarding alleged
      violations of Section 16(b) of the Exchange Act based on the same facts alleged
      in the Ritchie and McLaughlin suits, to
      which
      the Company has responded that in no case did it appear that options were
      exercised within six months or less from the date of grant and that each option
      would qualify as an exempt transaction under applicable rules.




Page
          16


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**




*Related
      Tax Matters*




In
      April
      2008, the Company paid $0.2 million to the U.S. Internal Revenue Service (“IRS”)
      related to payroll tax withholdings on prior option exercises by U.S. employees
      following an examination of the Company’s employment tax returns for the years
      2003 through 2005.




In
      2007
      and 2008, the Company has had communications with the U. K. HM Revenue &
Customs (“HMRC”) relating to historical stock option exercises. Subsequent to
      the sale of NYFIX Overseas, Inc. (“NYFIX Overseas”) in August 2006, G.L. Trade
      S.A. (“GL”) forwarded correspondence from the HMRC relating to NYFIX Overseas’
potential liability for payroll tax withholdings on prior option exercises
      by
      certain former employees.




As
      of
      March 31, 2008, the Company has recorded a liability of $1.9 million related
      to
      the payment to the IRS as well as for potential amounts due in the United
      Kingdom related to stock option exercises under Pay As You Earn, or PAYE, and
      National Insurance Contribution provisions (due to the Company’s indemnity
      obligations to GL).




Based
      upon the current information available and the liabilities
      recognized ,
      the
      Company believes the resolution of these tax matters will not have a material
      adverse effect on its consolidated financial condition or results of operations.
      However, the ongoing discussions with the taxing authorities could result in
      new
      information and higher than anticipated exposures. The Company is continuing
      to
      cooperate with the taxing authorities to resolve these matters.




*Other*




During
      the normal course of business, the Company becomes involved in various other
      routine legal proceedings, including issues pertaining to patent infringement,
      customer disputes and employee matters. The Company does not believe
      that the outcome of these matters will have a material adverse effect on its
      financial condition.




As
      noted
      separately in the condensed consolidated statements of operations, the Company
      incurred $0.1 million and $3.6 million for the three months ended March 31,
      2008
      and 2007, respectively, relating to the stock option investigation and
      subpoenas, a grand jury subpoena related to its stock option grants, related
      shareholder derivative litigation, related financial restatements and expenses
      to resolve related matters. These costs include outside counsels, contract
      attorneys and forensic accountants, other consultants and, for the three months
      ended March 31, 2007, the cost of re-auditing previously issued financial
      statements following the resignation of the Company’s former independent
      registered public accounting firm. These costs do not include any portion of
      time that the Company’s employees have dedicated to these matters. The Company
      will continue to incur expenses associated with these matters until they are
      resolved.




In
      January 2008, the Company received a $5.0 million advance from its primary
      carrier (reflecting the policy limit) under its previous Directors and Officers
      insurance policy for fees incurred in defense of the SEC investigation into
      the
      Company’s historical stock option activity, as well as related litigation. As
      this amount can be recovered by the carrier in certain circumstances, the
      Company has deferred recognition of these proceeds in its operating results
      until further progress is made in resolving these contingencies. The Company
      is
      pursuing additional claims from its secondary carriers under its previous
      insurance policies which have additional limits aggregating $10.0
      million.




Other
      than the amount described above for employee-related taxes for stock options,
      the Company, in accordance with SFAS No. 5, *Accounting
      for Contingencies* (“SFAS
      5”), has not recorded any liability with respect to these matters as it is
      currently unable to predict the outcomes and reasonably estimate the amounts
      of
      loss, if any. With respect to the SEC investigation of stock option grants,
      the
      grand jury subpoena, the State Court Consolidated Complaint, and the Federal
      Court Consolidated Complaint associated with such matters and other related
      matters, the Company could be subject to penalties, fines or regulatory
      sanctions or claims by current and former officers, directors or employees
      for
      indemnification of costs or losses they may incur and such amounts, individually
      or collectively, could have a material impact on the Company’s financial
      condition. In addition, other actions may be brought against the Company related
      to the matters described above.




**11.
      Stockholders’ Equity**




*Nasdaq
      Delisting and Relisting Proceedings*




On
      October 12, 2005, the Nasdaq Listing Qualifications Panel determined to continue
      the listing of the Company’s securities on the Nasdaq National Market, subject
      to the Company’s filing of its Quarterly Report on Form 10-Q for the three
      months ended June 30, 2005, on or before October 31, 2005. As a result of
      additional questions raised during the ongoing SEC and internal investigation
      into the Company’s accounting for stock option grants (see Note 10), the Company
      was unable to make this filing by October 31, 2005 and the Company’s common
      stock was delisted from the Nasdaq National Market on November 1,
      2005.




Page
          17


**Notes
        to Condensed Consolidated Financial Statements – continued
        (Unaudited)**




As
      a
      result of this delisting, the Company’s common stock was traded in the
      over-the-counter (“OTC”) securities market with real-time quotes available on
      the Pink Sheets electronic quotation service using the symbol NYFX from November
      1, 2005 through February 8, 2008.




On
      November 19, 2007, the Company applied to the Nasdaq Listing Qualifications
      Panel for relisting on the Nasdaq Capital Market. That application was approved
      on February 8, 2008, and on February 11, 2008, the Company’s common stock
      resumed trading on the Nasdaq Capital Market under the symbol NYFX.




*Preferred
      Stock*




The
      Company is authorized to issue 5 million shares of preferred stock. In
      connection with the private placement of convertible preferred stock discussed
      below, 1.5 million shares were designated as Series B Voting Convertible
      Preferred Stock and 0.5 million as Series C Non-Voting Convertible Preferred
      Stock.




At
      March
      31, 2008 and December 31, 2007, the Company had outstanding 1.5 million shares
      of Series B Preferred Stock. Dividends on the Series B Preferred Stock are
      payable semiannually in shares of the Company’s common stock. The number of
      shares issuable in payment of dividends is determined at an annual rate of
      7% of
      the $75 million purchase price (or $50 per share), divided by the conversion
      price then in effect (currently $5.00). Dividends on the Series B Preferred
      Stock are cumulative and all accumulated but unpaid dividends on the Series
      B
      Preferred Stock must be paid before any cash dividends may be paid to holders
      of
      common stock.




*Common
      Stock and Treasury Stock*




At
      December 31, 2007, the Company had outstanding 36,818,932 shares of common
      stock, with 906,826 held in treasury.




On
      December 11, 2007, the Board of Directors declared a dividend, payable January
      2, 2008, to holders of Series B Preferred Stock in payment of dividends
      accumulated through December 31, 2007. As a result, the Company issued 525,000
      restricted shares of common stock, with a fair value of approximately $2,441,000
      based on the market price of its common stock on the declaration date.




During
      the first quarter 2008, restricted stock units totaling 122,510 shares vested
      and were settled in shares.




On
      March
      29, 2008, restrictions on 48,169 shares of common stock issued to an officer
      in
      satisfaction of his employment agreement on March 31, 2007 expired. The fair
      value of such shares has been charged to stock based compensation over the
      requisite service period. Since these shares were issued from treasury, the
      excess of the average cost of these shares over the fair value of these shares
      on the grant date was charged to retained earnings at the conclusion of the
      requisite service period. Shares totaling 16,282 were issued back to the Company
      to settle employee tax liabilities as a result of this transaction, and these
      shares were returned to treasury.




As
      a
      result of the foregoing activity, at March 31, 2008, the Company had outstanding
      37,450,160 shares of common stock, with 923,108 held in treasury.




**12.
      Subsequent Event**




On
      April
      4, 2008, the Company acquired FIX City, Ltd. (“FIX City”), a U.K. based
      specialist in web-based electronic trading and liquidity discovery
      solutions.




Pursuant
      to the terms of the share purchase agreement, the Company paid £3.3 million (or
      approximately $6.6 million) in cash to acquire 100% of the outstanding equity
      in
      FIX City. The Company also agreed to pay an additional $1.0 million in cash
      consideration contingent on the successful completion of the integration of
      the
      existing FIX City and NYFIX technology platforms within six months of the
      closing date.




In
      addition, the share purchase agreement provides the potential for cash earn-out
      payments in years 1, 2 and 3 following the acquisition totaling up to £3.7
      million (or approximately $7.4 million) if certain revenue targets are achieved,
      with potential additional payments to be based on varying percentages of all
      such revenue if higher level target thresholds are achieved.




Page
          18




**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**




The
      following discussion should be read together with the accompanying Condensed
      Consolidated Financial Statements and notes thereto.




**Overview**




We
      are a
      pioneer in electronic trading solutions.  The NYFIX Marketplace TM is a
      global community of trading counterparties utilizing innovative services that
      optimize the business of trading, including trading workstations, middle office
      trade automation technologies and trade messaging services.  NYFIX
      Millennium provides the NYFIX Marketplace TM with
      enhanced methods of accessing liquidity.  We also provide value-added
      informational and analytic services and tools for measuring execution
      quality.  As a trusted business partner and service provider to investment
      managers, mutual fund, pension fund and hedge fund managers (the Buy-Side)
      and
      brokerage firms and banks (the Sell-Side), NYFIX enables low touch, low impact
      market access and transaction processing.




We
      operate businesses that design, produce and sell technology-based products
      and
      services to professional financial services organizations that are engaged
      in
      trading activities including traditional asset management (including the trading
      of those assets), proprietary trading, and/or the handling of client orders
      in
      the U.S. and international securities markets.




Many
      of
      our products and services utilize the FIX Protocol which is a messaging standard
      developed specifically for real-time electronic exchange of securities trading
      information.




We
      believe our innovative NYFIX products and services deliver value-added
      improvements in speed, quality of execution and cost efficiency by automating
      both the work flows at the user work station level and the interactive process
      of transmitting and executing orders between the Buy-Side institutional
      investors (e.g., hedge funds, investment advisers, mutual funds and pension
      funds) and the Sell-Side broker-dealers, and through exchanges (e.g., NYSE,
      American Stock Exchange, Nasdaq and other exchanges), the OTC market, ATSs
      and
      electronic communication networks, or ECNs.




**Sources
      of Revenues and Components of Expenses**




Our
      revenue is comprised of subscription and maintenance, transaction revenue and
      product sales and services, as follows:




Subscription
      and maintenance consists of contracts that provide for the use of our systems
      and our messaging channels, together with managed services, with a term of
      generally one to three years.  Additional services, provided under
      schedules, or addenda to the contracts, are either co-terminus with the original
      contract or have provisions similar to the original contract.  Under the
      terms of the subscription contracts and addenda, clients are typically invoiced
      a flat periodic charge after initial installation and acceptance. Subscription
      and maintenance also includes maintenance contracts for software under separate,
      renewable maintenance contracts. Software related maintenance contracts are
      generally for a term of one year. Revenue related to these contracts and addenda
      is recognized over the term of the contract, addendum, or service period, on
      a
      straight-line basis.  We include within our subscription and maintenance
      revenue charges for connectivity to the NYFIX trading community. These include
      the various costs of connecting clients which include telecommunications,
      installation and maintenance of routers, network management software, and staff,
      and other costs related to the management of connectivity. The connectivity
      charges are recognized as the services are provided.




Transaction
      revenue primarily consists of per-share commissions charged to clients who
      send
      and receive a match and execution in our NYFIX Millennium ATS and clients to
      whom we provide execution and smart order routing technology, gateways to access
      markets and algorithmic trading ability in: (i) their own name, (ii) a third
      party name, or (iii) our name. Revenue for these services is generally invoiced
      monthly in arrears or is obtained through the clearing process within three
      days
      of the trade date, and is recognized on a trade date basis, in the period in
      which it is earned. Transaction revenue also includes the net interest spread
      on
      our matched book of securities borrowed/loaned.




Product
      sales and services are primarily comprised of FIX software licenses, equipment
      sales and professional services fees. This revenue is recognized when the
      software and equipment have been shipped and accepted by the client and when
      other contractual obligations, including installation, if applicable, have
      been
      satisfied and collection of the resulting receivable is reasonably
      assured.




Cost
      of
      revenue includes the following:




·
            Data
                center operating costs, including salaries, related to equipment,
                infrastructure and software supporting operations and the NYFIX
                MarketplaceTM;




·
            Managed
                connectivity costs, including telecommunication and other costs incurred
                on behalf of clients, and costs to maintain the data centers, including
                depreciation and amortization of assets utilized by the data centers,
                which are recognized as either a cost of subscription and maintenance
                or
                cost of transaction revenue, as appropriate;




Page
          19




·
            Amortization
                expense of acquired intangible assets and capitalized software costs
                relating to the applicable revenue
                category;




·
            Developer
                and quality assurance personnel labor for client and product support
                of
                software products;




·
            The
                cost of leased subscription and service bureau equipment, which is
                depreciated over the estimated useful life of the equipment;
                and




·
            Execution
                and clearing costs to access various markets and exchanges and to
                process
                and settle transactions.




**Recent
      Developments**




*Fix
      City Acquisition* ****




On
      April
      4, 2008, we acquired FIX City. Pursuant
      to the terms of the share purchase agreement, we paid £3.3 million (or approx.
      $6.6 million) in cash to acquire 100% of the outstanding equity in FIX City
      and
      also agreed to pay an additional $1.0 million in cash consideration contingent
      on the successful completion of the integration of the existing FIX City and
      NYFIX technology platforms within six months of the closing date.




In
      addition, the share purchase agreement provides the potential for cash earn-out
      payments in years 1, 2 and 3 following the acquisition totaling up to £3.7
      million (or approx. $7.4 million) if certain revenue targets are achieved,
      with
      potential additional payments to be based on varying percentages of all such
      revenue if higher level target thresholds are achieved.




Following
      the acquisition, we expect to incur integration costs of approximately $1.0
      million comprised of non-cash valuation adjustments to our existing capitalized
      software costs, as the acquired technology will replace certain capitalized
      initiatives, as well as third-party costs to integrate the technology platforms.
      FIX City generated $2.2 million in revenues during 2007.




*Acquisition
      of Minority Interests*




In
      October 2007, we acquired the 20% interest in NYFIX Millennium that we did
      not
      already own.  The membership interests of the former minority members of
      NYFIX Millennium were converted into a right to receive an aggregate of $8.0
      million. During the three months ended December 31, 2007 and the three months
      ended March 31, 2008, $0.7 million and $4.7 million of this amount was paid,
      respectively. As a result, $2.6 million of this amount had not yet been paid
      as
      of March 31, 2008. We have previously included 100% of the operating results
      of
      NYFIX Millennium since inception in our consolidated financial
      statements.




*Euro
      Millennium*




During
      the second quarter of 2007, our Board of Directors approved a new initiative,
      Euro Millennium, a multilateral trading facility for non displayed liquidity
      in
      pan-European listed cash equities. This initiative leverages our experience
      gained with NYFIX Millennium in the United States with our goal of global
      expansion during a time of rapid regulatory change. During the three months
      ended March 31, 2008, we incurred $2.2 million of costs related to this
      initiative. These costs include compensation and related costs, consulting,
      marketing and travel related costs. Euro Millennium initiated trading during
      March 2008.




*Discontinuance
      of the Fusion OMS Business*




In
      October 2007, we entered into a strategic arrangement with Citi’s Lava Trading
      (“Lava”) to offer NYFIX Fusion OMS clients a transition arrangement to the Lava
      ColorPallette® OMS in connection with our decision to exit the Fusion OMS
      business. Discontinuing the Fusion OMS business will enable us to devote more
      time and resources to clients of other product offerings. In connection with
      exiting the Fusion OMS business, we offered one-time termination benefits to
      affected employees. We recorded a restructuring charge of $0.3 million during
      the three months ended March 31, 2008, which consisted of retention and
      severance costs. We expect the
      transition to be substantially complete by the end of the second quarter of
      2008
      and expect to incur an additional $0.3 million of such costs provided that
      certain employees stay for all or a portion of the remaining transition period,
      as required. We incurred an additional loss of $0.3 million associated with
      running the Fusion OMS business during the first quarter of 2008 and expect
      to
      incur and additional $0.6 million loss to run this business during the second
      quarter of 2008.




Page
          20




*SEC
      Investigation and Related Contingencies*




There
      is
      an ongoing SEC investigation of our historical stock option granting practices
      as well as a related grand jury subpoena and related shareholder derivative
      litigations and tax inquiries. In addition, in March 2007, we filed our Annual
      Report on Form 10-K for 2005 which included restatements of previously reported
      results related to stock-based compensation as well as acquisitions and
      investments, revenue recognition, income taxes and treasury stock. Our 2005
      10-K
      includes detailed findings of the internal review of our historical stock-based
      awards.




In
      April
      2008, we paid $0.2 million to the IRS related to payroll tax withholdings on
      prior option exercises by U.S employees following an examination of our
      employment tax returns for the years 2003 through 2005. We are also being
      reviewed by the HMRC in the U.K. related to withholdings and payroll taxes
      under
      PAYE and National Insurance Contribution provisions on prior stock option
      exercises of NYFIX Overseas employees (due to our indemnity obligations to
      GL).
      As of March 31, 2008, we have recorded a liability of $1.9 million related
      to
      these exposures.




During
      the three months ended March 31, 2008 and 2007, we incurred costs of $0.1
      million and $3.6 million, respectively relating to the stock option
      investigation and subpoenas, a grand jury subpoena, related shareholder
      derivative litigation, related financial restatements and expenses to resolve
      related matters. These costs include expenses for outside counsel, contract
      attorneys and forensic accountants, other consultants and, for the three months
      ended March 31, 2007, the cost of re-auditing previously issued financial
      statements following the resignation of our former independent registered public
      accounting firm. These costs do not include any portion of time that our
      employees have dedicated to these matters. We will continue to incur expenses
      associated with these matters until they are resolved. The amount of such
      expenses will likely vary and may be material.




In
      January 2008, we received a $5.0 million advance from our primary carrier under
      our previous directors and officers’ insurance policy (reflecting the policy
      limit) for fees incurred in defense of an SEC investigation into our historical
      stock option activity, as well as related litigation. As this amount can be
      recovered by the carrier in certain circumstances, we have deferred recognition
      of these proceeds in our operating results until further progress is made in
      resolving these contingencies. We are pursuing additional claims from our
      secondary carriers under our previous insurance policies which have additional
      limits aggregating $10.0 million.




Page
          21




**Results
      of Operations for the Three Month Periods Ended March 31, 2008 and 2007**




The
      following table presents our consolidated results of operations for the periods
      indicated. These consolidated results of operations are not necessarily
      indicative of the consolidated results of operations that will be achieved
      in
      any future period.




**Three Months Ended March 31,**(in thousands, except percentages)
            
            **2008**
            
            **% of**
              **revenue**
            
            **2007**
            
            **% of**
              **revenue****Revenue:**Subscription
                and maintenance
            
            $
            17,518
            
            
            56
            %
            $
            17,274
            
            
            62
            %Transaction
            
            
            13,268
            
            
            42
            %
            
            9,776
            
            
            35
            %Product
                sales and services
            
            
            621
            
            
            2
            %
            
            680
            
            
            2
            %Total
                revenue
            
            
            31,407
            
            
            100
            %
            
            27,730
            
            
            100
            %**Cost
                of revenue:**Subscription
                and maintenance (1)
            
            
            7,651
            
            
            24
            %
            
            8,546
            
            
            31
            %Transaction
                (1)
            
            
            6,412
            
            
            20
            %
            
            5,401
            
            
            19
            %Product
                sales and services (1)
            
            
            81
            
            
            0
            %
            
            387
            
            
            1
            %Total
                cost of revenue
            
            
            14,144
            
            
            45
            %
            
            14,334
            
            
            52
            %**Gross
                profit**
            
            
            17,263
            
            
            55
            %
            
            13,396
            
            
            48
            %**Operating
                expense:**Selling,
                general and administrative (1)
            
            
            20,396
            
            
            65
            %
            
            16,878
            
            
            61
            %SEC
                investigation, restatement and other related expenses (1)
            
            
            137
            
            
            0
            %
            
            3,593
            
            
            13
            %Depreciation
                and amortization
            
            
            447
            
            
            1
            %
            
            282
            
            
            1
            %Restructuring
                charge
            
            
            (158
            )
            
            -1
            %
            
            -
            
            
            0
            %Loss
                from operations
            
            
            (3,559
            )
            
            -11
            %
            
            (7,357
            )
            
            -27
            %Interest
                expense
            
            
            (211
            )
            
            -1
            %
            
            (136
            )
            
            0
            %Investment
                income
            
            
            546
            
            
            2
            %
            
            1,227
            
            
            4
            %Other
                expense, net
            
            
            -
            
            
            0
            %
            
            (15
            )
            
            0
            %Loss
                before income tax provision
            
            
            (3,224
            )
            
            -10
            %
            
            (6,281
            )
            
            -23
            %Income
                tax provision
            
            
            128
            
            
            0
            %
            
            47
            
            
            0
            %Net
                loss
            
            
            (3,352
            )
            
            NM
            
            
            (6,328
            )
            
            NMAccumulated
                preferred dividends
            
            
            (1,142
            )
            
            NM
            
            
            (1,717
            )
            
            NMLoss
                applicable to common stockholders
            
            $
            (4,494
            )
            
            NM
            
            $
            (8,045
            )
            
            NMNM
                - not meaningfulPercentage
                sub-totals may not add due to rounding(1)
                Stock-based compensation expense included in the respective line
                items
                above follows:Cost
                of revenue:Subscription
                and maintenance
            
            $
            130
            
            
            
            
            $
            10Transaction
            
            
            53
            
            
            
            
            
            -Product
                sales and services
            
            
            3
            
            
            
            
            
            1Selling,
                general and administrative
            
            
            2,614
            
            
            
            
            
            98SEC
                investigation, restatement and other related expenses (a)
            
            
            -
            
            
            
            
            
            (11
            )$
            2,800
            
            
            
            
            $
            98





(a)
      Relates to expiring options to be cash settled and extending the normal 90
      day
      post termination exercise period




Page
          22




**Revenue**




The
      following table presents our components of revenue:




**Three Months Ended**
              **March 31,**
            
            **Increase (Decrease)**(in thousands, except percentages)
            
            
            **2008**
            
            
            **2007**
            
            
            **$**
            
            
            **%**Subscription
                and maintenance
            
            $
            17,518
            
            $
            17,274
            
            $
            244
            
            
            1%Transaction
            
            
            13,268
            
            
            9,776
            
            
            3,492
            
            
            36%Product
                sales and services
            
            
            621
            
            
            680
            
            
            (59
            )
            
            -9%Total
                revenue
            
            $
            31,407
            
            $
            27,730
            
            $
            3,677
            
            
            13%




*Subscription
      and Maintenance*




The
      change in subscription and maintenance revenue for the three months ended March
      31, 2008, as compared to the three months ended March 31, 2007, primarily
      reflected the offsetting effects of an increase in subscriptions (and related
      managed services) of messaging channels offered by our FIX Division and a
      decrease in subscriptions (and related managed services) of our OMS Division
      desktop and floor products. The growth in messaging channels offered by our
      FIX
      Division was attributable to an increase in the number of Buy-Side to Sell-Side
      messaging channels, primarily for order routing, as we continued our efforts
      to
      increase the level of business with Buy-Side institutions. As of March 31,
      2008,
      we had 8,666 billable order routing channels in service, an increase of 21%
      over
      the 7,158 billable order routing channels in service at March 31, 2007, and
      an
      increase of 5% over the 8,245 channels in service at December 31, 2007. The
      decline in subscriptions (and related managed services) of our OMS Division
      desktop and floor products of $2.4 million, to $1.3 million for the three months
      ended March 31, 2008 compared to $3.7 million during the three months ended
      March 31, 2007, was due primarily to the discontinuation (during the second
      quarter of 2007) of certain floor application products, the wind-down of our
      Fusion OMS business as well as other cancellations from desktop
      clients. As a
      result of a strategic arrangement we entered into with Lava in October 2007
      to
      offer NYFIX Fusion OMS customers a transition arrangement to Lava’s
      ColorPalette® OMS, we expect our OMS revenues to continue to decline during the
      balance of 2008. We do not expect that the discontinuation of our Fusion OMS
      business will have a material impact on our operating results once the
      transition is complete, since we expect to reduce related operating costs. Recurring
      maintenance on licensed software was comparable between the three months ended
      2008 and 2007 at $0.9 and $1.0 million, respectively.




*Transaction*




The
      increase in transaction revenue for the three months ended March 31, 2008 was
      attributable to an increase in commissions on trade executions. Commissions
      increased $3.6 million to $13.0 million during the three months ended March
      31,
      2008 compared to $9.4 million during three months ended March 31, 2007 due
      primarily to a $2.1 million increase in commissions from Sell-Side clients
      and a
      $1.5 million increase in commissions from Buy-Side clients. The increase from
      Sell-Side clients was due to increased matched volumes in NYFIX Millennium
      and
      increased use of the NYFIX NEXAS TM algorithmic
      trading products, offset in part by a decline in billed specialist fees. The
      average daily matched volume in NYFIX Millennium during the three months ended
      March 31, 2008 was 49.4 million shares, a 20% increase over the average of
      41.3
      million shares during the three months ended March 31, 2007. Discontinuing
      our
      Fusion OMS business could impact future transaction revenue, as many of the
      Fusion OMS clients use our execution services.  Our
      securities lending business generated a consistent amount of net interest spread
      on its matched book stock borrow/stock loan portfolio of $0.3 million during
      both the three months ended March 31, 2008 and 2007.




Included
      in the NYFIX Millennium volume figures reported above are conditional orders
      executed against pass-through orders and other conditional orders, and third
      market trades crossed by clients and reported by NYFIX Millennium to
      Nasdaq.




*Product
      Sales and Services*




The
      decrease in product sales and services for the three months ended March 31,
      2008
      was primarily due to a decrease in sales of software licenses by our FIX
      Division. License fees for our FIX software products decreased $0.1 million
      to
      $0.4 million during the three months ended March 31, 2008 as compared to $0.5
      million for the same period in 2007. Professional services revenue, which
      includes training, was comparable at $0.2 million for the three months ended
      March 31, 2008 and 2007. We
      continue to invest in our FIX software business, including the hiring of
      dedicated sales resources and the enhancing of features to our existing products
      which will be included in new versions released in the second and third quarters
      of 2008 .




Page
          23




**Costs
      and Expenses**




*Cost
      of Revenue*




The
      following table presents our cost of revenue:




**Three Months Ended**
              **March 31,**
            
            **Increase (Decrease)**(in thousands, except percentages)
            
            **2008**
            
            **2007**
            
            **$**
            
            **%**Subscription
                and maintenance
            
            $
            7,651
            
            $
            8,546
            
            $
            (895
            )
            
            -10%Transaction
            
            
            6,412
            
            
            5,401
            
            
            1,011
            
            
            19%Product
                sales and services
            
            
            81
            
            
            387
            
            
            (306
            )
            
            -79%Total
                cost of revenue
            
            $
            14,144
            
            $
            14,334
            
            $
            (190
            )
            
            -1%Percent
                of total revenue
            
            
            45
            %
            
            52
            %




*Subscription
      and Maintenance*




The
      decrease in subscription and maintenance cost of revenue for the three months
      ended March 31, 2008 was primarily attributable to lower amortization of
      capitalized software costs of $0.4 million, lower allocated labor costs of
      $0.4
      million and a decrease in telecommunication costs of $0.2 million. These
      decreases were offset in part by an increase in fees paid of $0.1 million to
      third-party order management system providers to establish messaging channels
      with their clients and increases in various other costs. As a percentage of
      related revenue, these costs decreased to 44% for the three months ended March
      31, 2008 as compared to 49% for the three months ended March 31,
      2007.




*Transaction*




The
      increase in transaction cost of revenue for the three months ended March 31,
      2008 primarily related to higher allocated data center costs of $0.4 million,
      market data fees of $0.2 million, depreciation costs of $0.2 million, and
      allocated labor costs of $0.2 million. Despite increased revenue, execution
      and
      clearing fees remained flat primarily due to changes in the revenue mix to
      higher margin services and a rebate received of $0.5 million on clearing
      services used. As a percentage of related revenue, these costs decreased to
      48%
      for the three months ended March 31, 2008, as compared to 55% for the three
      months ended March 31, 2007.




*Product
      Sales and Services*




The
      decrease in product sales and services cost of revenue for the three months
      ended March 31, 2008 was attributable to lower intangible asset amortization
      of
      $0.3 million as a result of certain intangible assets becoming fully amortized
      in the second quarter of 2007. As a percentage of related revenue these costs
      decreased to 13% for the three months ended March 31, 2008 as compared to 57%
      for the same period of 2007.


Page
            24




*Selling,
      General and Administrative Expenses (SG&A)*




The following table presents the components of our selling, general and
      administrative expense :




**Three Months Ended**
              **March 31,**
            
            **Increase (Decrease)**(in thousands, except percentages)
            
            **2008**
            
            **2007**
            
            **$**
            
            **%**Compensation
                and related
            
            $
            8,932
            
            $
            7,838
            
            $
            1,094
            
            
            14%Occupancy
                and related
            
            
            1,171
            
            
            810
            
            
            361
            
            
            45%Marketing,
                travel and entertainment
            
            
            1,215
            
            
            792
            
            
            423
            
            
            53%Professional
                fees (including consulting)
            
            
            2,389
            
            
            2,921
            
            
            (532
            )
            
            -18%General
                and other
            
            
            1,597
            
            
            1,641
            
            
            (44
            )
            
            -3%Stock-based
                compensation
            
            
            2,614
            
            
            98
            
            
            2,516
            
            
            2567%Transitional
                rebuilding and remediation
            
            
            148
            
            
            1,742
            
            
            (1,594
            )
            
            -92%Transitional
                employment costs
            
            
            110
            
            
            1,036
            
            
            (926
            )
            
            -89%Euro
                Millennium costs
            
            
            2,220
            
            
            -
            
            
            2,220
            
            
            -Total
                SG&A
            
            $
            20,396
            
            $
            16,878
            
            $
            3,518
            
            
            21%Percent
                of total revenue
            
            
            65
            %
            
            61
            %





Now
      that
      we have completed our restatement and re-listing initiatives and have
      substantially completed our transitional programs, we have increased our focus
      on improving our margins and are more actively managing our cost structure.
      We
      realized significant achievements in these efforts during the first quarter
      of
      2008. Excluding stock-based compensation, Euro Millennium and transitional
      costs, SG&A for the first quarter of 2008 was down 14% and 15%,
      respectively, from the levels incurred in the fourth quarter of 2007 and the
      third quarter of 2007. These recent declines reflected reduced costs for outside
      professionals (e.g. legal and accounting), consultants and various other
      expenses. Total SG&A declined 26% and 7% from the levels incurred in the
      fourth quarter of 2007 and the third quarter of 2007, respectively. The
      discussion below compares the individual components of SG&A for the first
      quarter of 2008 and the first quarter of 2007.




*Compensation
      and Related*




The
      increase in the portion of recurring compensation and related costs included
      in
      SG&A for the three months ended March 31, 2008 as compared to the three
      months ended March 31, 2007 was primarily due to the impact of salary increases,
      growth in headcount during 2007 as we built-up our organization for scalable
      growth, increased incentive compensation associated with higher revenue levels
      and increased costs for employee benefits.




*Occupancy
      and Related*




Occupancy
      and related costs increased $0.4 million for the three months ended March 31,
      2008 due primarily to additional rent expense associated with our expansion
      of
      office space in both our New York City and London locations.




*Marketing,
      Travel and Entertainment*




The
      increase in marketing, travel and entertainment expenses for the three months
      ended March 31, 2008 primarily reflected increased employee travel related
      costs
      incurred to support our European expansion efforts partially offset by a
      decrease in marketing as a result of the timing of industry trade show and
      our
      product promotion campaigns.




*Professional
      Fees (including consulting)*




The
      decrease in professional fees incurred for the three months ended March 31,
      2008, was primarily due to a decrease in legal and accounting fees. Legal and
      accounting fees decreased $0.7 million to $0.5 million as compared to $1.2
      million for the same period in 2007. Consulting costs included in this category
      do not include the time spent by outside consultants and advisors on the
      restatements and related legal issues as such costs have been separately
      categorized below.




*General
      and Other*




General
      and other expenses were comparable at $1.6 million for the three months ended
      2008 as compared to the same period of 2007.




Page
          25




*Stock-based
      Compensation*




The
      increase in stock-based compensation included in SG&A for the three months
      ended March 31, 2008 was primarily due to significant grants of stock options
      and restricted stock units during the fourth quarter of 2007 and first quarter
      of 2008 following the adoption of the 2007 Omnibus Equity Compensation Plan.
      These grants were intended to be an up-front, multi-year program to assist
      in
      retention and to further promote alignment of the interests of our employees
      with those of our stockholders. Stock-compensation expense (including the amount
      recorded in cost of revenue) is expected to be approximately $2.0 million per
      quarter for the remainder of 2008.




*Transitional
      Rebuilding and Remediation Costs*




Transitional
      rebuilding and remediation costs reflect the impact of a company-wide,
      Board-approved effort in 2007, following the $75 million preferred stock
      investment by Warburg Pincus, to remediate deficiencies involving critical
      operational systems and processes, including technology infrastructure and
      management information systems. As a result of this effort, during 2007 we
      remediated our lab environment, data replication and back-up, network
      monitoring, application security and we enabled more timely and detailed
      internal and external financial reporting. These efforts also addressed certain
      historical administrative issues such as reorganizing certain subsidiaries
      and
      initiating new compensation programs which were rolled out in October 2007.
      Substantially all of the costs for this program were incurred by December 31,
      2007, which primarily consisted of fees paid to outside consultants. During
      the three months ended March 31, 2008 and 2007, we incurred $0.1 million and
      $1.7 million of such costs, respectively. We
      expect
      to incur an additional $0.1 million of these costs during the second quarter
      of
      2008, as we complete our last project under this program.




*Transitional
      Employment Costs*




Transitional
      employment costs reflect our efforts to build critical teams, retain key
      employees, and remediate certain skill gaps. These transitional costs, primarily
      consisting of sign-on bonuses, retention bonuses and severance and other
      termination benefits are being expensed over the required service period. During
      the three months ended March 31, 2008 and March 31, 2007, we incurred $0.1
      million and $1.0 million of such costs, respectively. We
      expect to incur approximately $0.1 million of such costs during the second
      quarter of 2008.




*Euro
      Millennium Costs*




In
      the
      second quarter of 2007, our Board of Directors approved a new initiative, Euro
      Millennium TM ,
      a
      multilateral trading facility for non-displayed liquidity in pan-European listed
      cash equities. This initiative leverages our experience gained with NYFIX
      Millennium in the U.S. with our goal of global expansion during a time of rapid
      regulatory change. During the three months ended March 31, 2008, we incurred
      $2.2 million of costs related to this initiative. These costs include
      compensation and related costs, consulting, marketing and travel related costs.




*Other
      Operating Expenses*




Other
      operating expenses consist of the following:




**Three Months Ended**
              **March 31,**
            
            **Increase (Decrease)**(in thousands, except percentages)
            
            **2008**
            
            **2007**
            
            **$**
            
            **%**SEC
                investigation, restatement and other related expenses
            
            $
            137
            
            $
            3,593
            
            $
            (3,456
            )
            
            -96%Depreciation
                and amortization
            
            
            447
            
            
            282
            
            
            165
            
            
            59%Restructuring
                charge
            
            
            (158
            )
            
            -
            
            
            (158
            )
            
            -




*SEC
      Investigation, Restatement and Other Related Expenses*




During
      the three months ended March 31, 2008 and 2007, we incurred costs relating
      to
      the stock option investigation and subpoenas, a grand jury subpoena related
      to
      our stock option grants, related shareholder derivative litigation, related
      financial restatements and expenses to resolve related matters. These costs
      include outside counsels, contract attorneys and forensic accountants, other
      consultants and, for the three months ended March 31, 2007, the cost of
      re-auditing previously issued financial statements following the resignation
      of
      our former independent registered public accounting firm. These costs do not
      include any portion of time that our employees have dedicated to these
      matters.  We
      will
      continue to incur expenses associated with these matters until they are
      resolved. The amount of such expenses will likely vary and may be
      material.




These
      costs decreased $3.5 million to $0.1 million for the three months ended March
      31, 2008, compared to $3.6 million for the three months ended March 31, 2007
      which reflects
      the filing of our 2005 10-K in March of 2007 following the restatement of our
      consolidated financial statements as a result of the SEC investigation into
      prior stock option grants and related restatements (the “2005
      Restatement”) .
      With
      the completion of the 2005 Restatement in March 2007, these costs have continued
      to decline.




In
      January 2008, we received a $5.0 million advance from our primary carrier
      (reflecting the policy limit) under our previous Directors and Officers
      insurance policy for fees incurred in defense of the SEC investigation into
      our
      historical stock option activity as well as related litigation. As this amount
      can be recovered by the carrier in certain circumstances, we have deferred
      recognition of these proceeds in our operating results until further progress
      is
      made in resolving these contingencies. We are pursuing additional claims from
      our secondary carriers under our previous insurance policies which have
      additional limits aggregating $10.0 million.




Page
          26




*Depreciation
      and Amortization*




The
      increase in the portion of depreciation and amortization included in SG&A
      for the three months ended March 31, 2008 was due to increased general overhead
      capital expenditures during 2007.




*Restructuring
      Charge*




The
      restructuring charge in the three months ended March 31, 2008 reflects
      employment costs of $0.3 million related to discontinuance of our Fusion OMS
      product in the fourth quarter of 2007 and the continuing transition of our
      clients to other platforms, offset by a $0.5 million reversal of amounts
      previously recorded as restructuring costs as a result of the termination
      of our lease and corresponding sublease of office space previously occupied
      in
      Stamford.




**Other
      Income (Expense)**




Other
      income (expense) items are as follows:




**Three Months Ended**
              **March 31,**
            
            **Increase**
              **(Decrease)**(in thousands)
            
            **2008**
            
            **2007**
            
            **$**Interest
                expense
            
            $
            (211
            )
            $
            (136
            )
            $
            75Investment
                income
            
            
            546
            
            
            1,227
            
            
            (681
            )Other
                expense, net
            
            
            -
            
            
            (15
            )
            
            15




*Interest* *Expense* **




The
      increase in interest expense for the three months ended March 31, 2008 was
      primarily attributable to additional interest incurred due to the additional
      $2.5 million convertible note.




*Investment* *Income*




The
      decrease in investment income for the three months ended March 31, 2008
      reflected lower average cash balances invested and lower interest rates during
      the period.




**Income
      Tax Provisi** **on**




The
      income tax provisions for the three months ended March 31, 2008 and 2007 were
      solely attributable to the impact of deducting goodwill related to the NYFIX
      Millennium acquisition and previously the Renaissance acquisition in our tax
      filings. All other tax effects during the three months ended March 31, 2008
      and
      2007 have been netted out in our deferred tax asset valuation reflecting our
      view that historical pre-tax book income and historical income for tax purposes
      are not sufficient to support a conclusion that the value of our net deferred
      tax assets are more likely than not to be realized. Until we achieve and sustain
      an appropriate level of profitability, we plan to maintain a valuation allowance
      on our net deferred tax assets.




**Liquidity
      and Capital Resources**




We
      derive
      our liquidity and capital resources primarily from issuances of stock and from
      long-term borrowings. At March 31, 2008, we had cash and cash equivalents of
      $57.6 million, a reduction from our balance at December 31, 2007, principally
      due to the timing of accrued employee compensation payments for 2007, including
      annual incentive and retention related bonuses, commissions, severance and
      employee benefit obligations, as well as payments to the former minority owners
      of NYFIX Millennium to acquire their interests. We believe resources available
      at March 31, 2008 will be sufficient to finance our current investing, and
      operating needs as well as the net capital requirements of our broker-dealer
      subsidiaries for at least the next twelve months. We may need to raise
      additional outside funding for strategic acquisitions and such sources may
      dilute existing stockholders. At March 31, 2008, $40.4 million of our total
      cash
      and cash equivalents were held in our broker-dealer subsidiaries to help meet
      their regulatory capital requirements.




**As of****March 31,**
            
            **December 31,**(in thousands)
            
            **2008**
            
            **2007**Cash
                and cash equivalents
            
            $
            57,642
            
            $
            75,657




Page
          27




**Three Months Ended March 31,**(in thousands)
            
            **2008**
            
            **2007**Net
                cash used in operating activities
            
            $
            (9,001
            )
            $
            (7,444
            )Net
                cash used in investing activities
            
            
            (8,574
            )
            
            (3,464
            )Net
                cash used in financing activities
            
            
            (453
            )
            
            (343
            )Effect
                of exchange rate changes on cash
            
            
            13
            
            
            (3
            )Net
                decrease in cash and cash equivalents
            
            $
            (18,015
            )
            $
            (11,254
            )




*Operating
      Activities*




The
      following table sets forth our net loss adjusted for non-cash items, such as
      depreciation, amortization, deferred taxes, and stock-based compensation; and
      the effect on cash used in operating activities of changes in working
      capital and other operating accounts between periods.




**Three Months Ended March 31,**(in thousands)
            
            **2008**
            
            **2007**Net
                loss adjusted for non-cash items
            
            $
            1,748
            
            $
            (3,416
            )Effect
                of changes in working capital and other operating accounts
            
            
            (10,749
            )
            
            (4,028
            )Net
                cash used in operating activities
            
            $
            (9,001
            )
            $
            (7,444
            )




Changes
      in working capital and other operating accounts affected cash flows during
      the
      periods primarily as a result of a decrease in the level of accounts payable
      and
      accrued expenses between periods, primarily from the net effect of the timing
      of
      accrued employee compensation payments for 2007 including annual incentive
      and
      retention related bonuses, commissions, severance and employee benefit
      obligations, and the receipt of deferred insurance proceeds, as well as
      increases in net clearing assets and accounts receivable associated with the
      growth of our business.




*Broker-Dealer
      Operations*




Clearing
      assets reflect amounts on hand to support our ability to settle the transactions
      of NYFIX Millennium, NYFIX Securities and NYFIX International, such as
      receivables from clearing organizations and firms and deposits with clearing
      organizations and firms, as well as balances to support our matched-book stock
      borrow/stock loan business. Our matched-book balances include offsetting stock
      borrowed and stock loaned and offsetting securities failed-to-deliver and
      securities failed-to-receive. At March 31, 2008, the net balance for clearing
      assets and clearing liabilities was a net receivable of $3.9
      million.




Securities
      borrowed and securities loaned are recorded at the amount of cash collateral
      provided for securities borrowed transactions and received for securities loaned
      transactions, plus accrued interest. We monitor the market value of securities
      borrowed and loaned on a daily basis with additional collateral obtained or
      refunded as necessary. At March 31, 2008, clearing assets include stock borrows
      of $716.8 million and clearing liabilities include stock loans of $717.5
      million.




NYFIX
      Millennium and NYFIX Securities are U.S. registered broker-dealers required
      to
      maintain levels of regulatory net capital under Rule 15c3-1 of the Exchange
      Act.
      NYFIX Securities’ DTCC membership, used to self-clear securities transactions,
      requires it to maintain $10 million in excess of its required net capital.
      NYFIX
      International is a registered firm with the FSA, required to maintain the
      greater of the base capital resources requirement of €730,000 or the variable
      capital resources requirement, which is made up of credit risk, market risk
      and
      fixed overhead (equal to three months average expenditures) requirements. At
      March 31, 2008, the aggregate regulatory net capital/resources of our regulated
      subsidiaries in the U.S. and U.K. were $35.1 million, $23.4 million in excess
      of
      our aggregate requirement of $11.7 million (including the $10 million excess
      required by DTCC).




When
      Euro
      Millennium initiated trading activities in March 2008, the minimum financial
      resources requirement for NYFIX International increased to approximately
€730,000. To satisfy this requirement, $1.5 million of subordinated debt on
      the
      books of NYFIX International was converted into equity capital in March 2008.
      In
      addition, in March 2008, we infused an additional $1.5 million of cash into
      NYFIX International to provide further excess regulatory capital resources
      to
      allow for business expansion.




Page
          28




*Investing
      Activities*




Investments
      in current technology to maintain our infrastructure and to enhance our products
      remain an important requirement for our available cash resources.




Net
      cash
      used in investing activities for the three months ended March 31, 2008 was
      $8.6
      million. This consisted of capital expenditures for property and equipment,
      principally for data center equipment and software, of $2.5 million, capitalized
      software costs of $1.5 million and $4.7 million in payments
      to the former minority owners of NYFIX Millennium to acquire their
      interests. We
      expect further investments during the remainder of 2008 including the $6.6
      million paid for the acquisition of FIX City in April 2008.




Net
      cash
      used in investing activities for the three months ended March 31, 2007 was
      $3.5
      million. This consisted of capital expenditures for property and equipment,
      principally for data center equipment and software, of $2.7 million and
      capitalized software costs of $0.8 million.




*Financing
      Activities*




Our
      financing activities primarily consist of long-term debt issued for working
      capital purposes, capital lease obligations used for equipment purchases, and
      issuances of capital stock for general corporate purposes and business
      development activities.  At
      March
      31, 2008, we had long-term debt and capital lease obligations outstanding
      aggregating $11.2 million (including current portions).




At
      March
      31, 2008, we had outstanding two convertible notes aggregating $10.0 million
      with substantially similar terms to the same lender. The convertible notes
      incur
      interest at a rate of 5% and are due in December 2009. At March 31, 2008, the
      price at which the lender could convert the convertible notes into shares of
      our
      common stock was $5.64 per share. The conversion price may be reduced if we
      issue shares of common stock at a price below the conversion price in effect,
      excluding stock option exercises, the settlement of obligations outstanding
      as
      of the date of the convertible note and other transactions previously approved
      by our Board of Directors.




Net
      cash
      used in financing activities for the three months ended March 31, 2007 was
      $0.3
      million, consisting primarily of principal payments under capital lease
      obligations.




**Commitments
      and Contingencies**




There
      are
      various lawsuits and claims pending against us as well as ongoing SEC and United
      States Attorney’s Office investigations into our accounting for stock option
      grants and an SEC investigation into our accounting for the losses incurred
      by
      NYFIX Millennium. We are currently unable to predict the outcomes and reasonably
      estimate the amounts of loss, if any, with respect to these matters. With
      respect to certain of these matters, we could be subject to penalties, fines
      or
      regulatory sanctions or claims by current and former officers, directors or
      employees for indemnification of costs or losses they may incur and such
      amounts, individually or collectively, could have a material impact on our
      financial condition. In addition, other actions may be brought against us
      related to these matters.




See
      Note
      10 to the Condensed Consolidated Financial Statements included in this Quarterly
      Report on Form 10-Q and Note 9 to our Consolidated Financial Statements for
      the
      fiscal year ended December 31, 2007 filed with our 2007 Form 10-K for a
      description of our commitments and contingencies.




**Seasonality
      and Inflation**




We
      believe that our operations have not been significantly affected by seasonality
      or inflation.




**Off-balance
      Sheet Arrangements**




We
      have
      no material off-balance sheet arrangements, as defined under SEC rules, other
      than those related to the contingent obligations under the convertible notes
      as
      described above and under the terms of our Series B Preferred Stock as described
      in our 2007 Form 10-K.




Page
          29




**Critical
      Accounting Policies and Estimates**




The
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with GAAP. The preparation of these financial statements requires
      us
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues, and expenses and related disclosures of contingent assets
      and liabilities. On an on-going basis, we evaluate our estimates, including
      our
      allowance for doubtful accounts, inventory valuation and obsolescence,
      long-lived tangible and intangible assets, income taxes, and contingencies
      and
      litigation. We base our estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates under different assumptions
      or
      conditions. In our 2007 10-K, we identified and disclosed critical accounting
      policies, which included revenue recognition, allowance for doubtful accounts,
      property and equipment, acquisitions and goodwill, capitalized software costs,
      long-lived assets, income taxes, contingencies and stock-based compensation.
      These critical accounting policies affect significant judgments and estimates
      used in the preparation of our financial statements. We reviewed our policies
      in
      conjunction with the preparation of this report and have determined that those
      critical policies remain and have not changed since December 31, 2007.




Page
          30




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**




There
      have been no material changes in our exposure to market risk during the three
      months ended March 31, 2008, from those described in Part II, Item 7A,
      Quantitative and Qualitative Disclosures About Market Risk, included in our
      2007
      Form 10-K.




**Item
      4. Controls and Procedures**




***Disclosure
      Controls and Procedures***




In
      connection with the preparation of this Quarterly Report on Form 10-Q, our
      management, with the participation of our
      Chief Executive Officer and our Chief Financial Officer, carried out an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures as of March 31, 2008. Disclosure controls and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act, are controls and other procedures that are designed to ensure that the
      information that we are required to disclose in the reports that we file or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s Rules and Forms, and that such
      information is accumulated and communicated to our management, including our
      Chief Executive Officer and Chief Financial Officer, as appropriate to allow
      timely decisions regarding required disclosure.




As
      disclosed in our 2007 Form 10-K, management and our independent registered
      public accounting firm identified two material weaknesses regarding elements
      of
      our internal control over financial reporting as of December 31, 2007. A
      material weakness is a deficiency or a combination of deficiencies in internal
      control over financial reporting, such that there is a reasonable possibility
      that a material misstatement of the company’s annual or interim financial
      statements will not be prevented or detected on a timely basis. Material
      weaknesses in internal controls may also constitute deficiencies in our
      disclosure controls and procedures.




Based
      on
      the results of this evaluation including the existence of material weaknesses
      in
      our internal control over financial reporting, our Chief Executive Officer
      and
      Chief Financial Officer concluded that our disclosure controls and procedures
      were not effective at the reasonable assurance level as of March 31, 2008.




**Interim
      Measures to Ensure the Accuracy of Financial Reporting**




In
      response to the material weaknesses identified as a result of management’s
      assessment of internal control over financial reporting as disclosed in our
      2007
      Form 10-K, our management, with oversight from our Audit Committee, has
      performed expanded and compensating measures to help ensure the accuracy of
      our
      financial reporting until such time as we are able to remedy all of our material
      weaknesses. Such measures included, among other things:




·
            expansion
                of our period-end closing
                procedures;


·
            enhanced
                monitoring and communications;


·
            additional
                analyses and cross team reviews;


·
            the
                dedication of significant internal resources;
                and


·
            additional
                top-level management reviews of financial information and related
                disclosures.




As
      a
      result of these expanded and compensating procedures, we concluded that the
      consolidated financial statements included in this Quarterly Report on Form
      10-Q
      present fairly, in all material respects, our financial position, results of
      operations and cash flows for the periods presented in conformity with GAAP.




The
      certifications of our principal executive officer and principal financial
      officer required in accordance with Section 302 of the Sarbanes-Oxley Act of
      2002 are attached as exhibits to this Quarterly Report on Form 10-Q. The
      disclosures set forth in this Item 4 contain information concerning the
      evaluation of our disclosure controls and procedures and our internal control
      over financial reporting, referred to in the certifications. Those
      certifications should be read in conjunction with this Item 4 for a complete
      understanding of the matters covered by the certifications.




***Changes
      in Internal Control Over Financial Reporting***




There
      was
      no change in our internal control over financial reporting that occurred during
      the quarterly period ended March 31, 2008 that has materially affected, or
      is
      reasonably likely to materially affect our internal control over financial
      reporting.




Our
      SOX
      404 Operations & Remediation Committee and members of our finance team
      implemented a number of significant changes to our internal control structure
      during 2007 which resulted in the remediation of numerous previously disclosed
      material weaknesses. For the remaining two identified material weaknesses as
      of
      December 31, 2007 - controls over revenue from historical subscriptions and
      controls related to the acquisition, tracking and disposition of property and
      equipment, we have developed corrective action plans with the goal of completing
      the remediation during 2008. We have completed a number of significant
      milestones in these action plans, however, additional work remains. While we
      believe our ongoing efforts have improved our internal control over financial
      reporting, including our hiring in February 2008 of a new Chief Information
      Officer, we have not completed the redesign and/or implementation of all
      necessary procedures and controls or our documentation and testing of the
      processes. Accordingly, we will continue to perform the interim measures
      described above and monitor the effectiveness of our internal control over
      financial reporting in the areas impacted by the material weaknesses discussed
      above.


Page
          31


**PART
      II — OTHER INFORMATION**




**Item
      1. Legal Proceedings**




There
      have been no material changes during the three months ended March 31, 2008,
      with
      respect to the legal proceedings described in Part I, Item 3, Legal Proceedings,
      included in our 2007 Form 10-K.




**Item
      1A. Risk Factors**




There
      have been no material changes during the three months ended March 31, 2008
      with
      respect to the Risk Factors described in Part I, Item 1A, Risk Factors, included
      in our 2007 Form 10-K.




**Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds**




**(a)**
                  **Sales
                      of Unregistered Securities during the Quarter ended March 31, 2008**
 Not
        applicable.
  **(b)**
                **Issuer
                    Purchases of Equity Securities during the Quarter ended March 31,
                    2008**
 **Period**
                  
                  **Total
                      Number of**
                    **Shares
                      Purchased**
                  
                  **Average
                      Price**
                    **Paid
                      per Share**
                  
                  **Total
                      Number of Shares Purchased as Part of Publicly Announced Plans
                      or Programs**
                  
                  **Maximum
                      Number (or Approximate Dollar Value) of Shares that May Yet
                      Be Purchased
                      Under the Plans or Programs**January
                      1 through 31
                  
                  
                  -
                  
                  $
                  -
                  
                  NA
                  
                  NAFebruary
                      1 through 29
                  
                  
                  -
                  
                  
                  -
                  
                  NA
                  
                  NAMarch
                      1 through 31
                  
                  
                  16,282
                  
                  
                  4.35
                  
                  NA
                  
                  NATotal
                  
                  
                  16,282
                  
                  
                  
                  
                  NA
                  
                  NA


**Item
      3. Defaults Upon Senior Securities**




Not
      applicable.




**Item
      4. Submission of Matters to a Vote of Security Holders**




Not
      applicable.




**Item
      5. Other Information**




Not
      applicable.


Page
          32





**Item
      6.****Exhibits**




a.)
            Exhibits





**Exhibit**
              **No.**
            
            **Description of Exhibit***10.1
                †
            
            Agreement
                for the Sale and Purchase of the entire issued share capital of FIXCITY,
                LTD dated April 4, 2008*10.2
            
            NYFIX,
                Inc. 2008 Annual Incentive Plan*31.1
            
            Certification
                of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





*
            Filed
                herewith
              †Confidential
                treatment requested as to certain portions, which portions are omitted
                and
                filed separately with the Securities and Exchange
                Commission.


Page
          33


**Signatures**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




NYFIX, INC.May
                12, 2008
            /s/ P.
                Howard EdelsteinP.
                Howard EdelsteinPresident
                and Chief Executive OfficerMay
                12, 2008
            /s/ Steven
                R. VigliottiSteven
                R. VigliottiChief
                Financial Officer




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          34